EUR/JPY Depreciates to Near 159.50 as Japanese Yen Rises Amid Hawkish Boj

Source:Reuters

USD/CHF drifts higher to near 0.9045 in Friday’s early European session. 

US PPI inflation dampens Fed rate cut odds. 

Israel said Hamas must release three hostages on Saturday, or war will resume. 

The USD/CHF pair gains ground to around 0.9045 during the early European session on Friday. The renewed US Dollar (USD) demand provides some support to the pair. However, the safe-haven flows amid the uncertainty and geopolitical risks might cap the upside of USD/CHF. 

The hotter-than-expected US Producer Price Index (PPI) reinforced expectations that the US Federal Reserve (Fed) will keep interest rates for an extended period. Additionally, Fed Chair Jerome Powell highlighted that the Fed is in no rush to cut interest rates due to continued strength in the labor market and solid economic growth.

BMO’s Scott Anderson emphasized the Fed’s growing caution regarding future rate cuts, noting that “higher-for-longer interest rates is becoming the mantra again. Traders will keep an eye on the release of US Retail Sales for January, which is due later on Friday. In case of a hotter outcome, this could further lift the USD against the Swiss Franc (CHF). 

Data released by the Swiss Federal Statistical Office on Thursday showed that Switzerland's Consumer Price Index (CPI) inflation eased to 0.4% YoY in January from 0.6% in December. This figure came in line with market expectations and registered the lowest level since April 2021. On a monthly basis, the CPI declined by 0.1%, maintaining the same pace as the previous period.

Meanwhile, the uncertainty and geopolitical concerns are likely to boost the traditional safe-haven currency like the Swiss Franc (CHF). The Israeli government stated that it plans to stick to the hostage-release timeline agreed upon in the cease-fire agreement with Hamas, but has warned that if the expected three hostages are not released on Saturday, it would return to war.

Source: FXSTREET

BENGALURU (Feb 13): Gold prices held steady on Friday and were poised for a seventh consecutive weekly gain as US President Donald Trump's plans to impose reciprocal tariffs on every country taxing US imports fuelled concerns of a global trade war.

Spot gold held its ground at US$2,927.50 per ounce, as of 0534 GMT. Bullion hit a record peak of US$2,942.70 on Tuesday.

US gold futures rose 0.4% to US$2,956.30.

On Thursday, Trump tasked his economics team with devising plans for reciprocal tariffs on every country taxing US imports, and the targets include China, Japan, South Korea and the European Union.

A major trigger for gold prices this week was Trump's announcement to impose reciprocal tariffs, which is creating tariff war concerns and could impact global economies, said Ajay Kedia, director at Mumbai-based Kedia Commodities.

The market is slightly overbought, which can create some technical profit booking after nearing the US$3,000 level, Kedia said.

Meanwhile, data on Thursday showed the US producer price index (PPI) saw a strong increase in January, following Wednesday's inflation report that revealed consumer prices had risen at the fastest pace in nearly a year and a half.

The PPI data offered more evidence that inflation was accelerating again and strengthened views that the Federal Reserve would not cut interest rates before the second half of the year.

Bullion is traditionally viewed as a safe haven against inflation and economic uncertainty, but the appeal of this non-yielding asset diminishes with rising interest rates.

US-China trade breakthrough, de-escalation in Russia-Ukraine or Israel-Hamas conflicts, or strong US data that takes Fed rate cuts off the table for this year are possible reasons for gold prices to drop and all seem to be unlikely in the near term, said Ilya Spivak, head of global macro at Tastylive.

Source: Theedgemarkets

Malaysia ended 2024 on a roll: its economy grew faster than official forecasts, its currency was the best performer in emerging markets and, after an extended period of political turmoil, its government stayed intact for a second full year.

Sustaining that momentum is a priority for Prime Minister Datuk Seri Anwar Ibrahim, but the challenges to that vision are quickly piling up.

For starters, US President Donald Trump’s early moves to boost tariffs has Malaysian businesses bracing for inflationary pressures at home and abroad. That’s a global worry, but the hit that tariffs are expected to deliver to Malaysia’s exports — and growth — could quickly undermine Anwar’s plans to reduce the deficit by slashing subsidies for things like gasoline.

“It will be a challenging year ahead for most economies, especially small, export-oriented ones like Malaysia, facing both growth downsides and inflationary pressures,” said Adib Zalkapli, the founder of Viewfinder Global Affairs, a regional geopolitical consultancy.

Malaysia’s final report on gross domestic product released Friday showed the economy expanded 5.1% last year, and 5% in the final three months of 2024, driven mainly by domestic demand, according to the nation’s central bank. That’s below the 5.3% expansion in July to September, marking a second straight quarter of slower growth. Now headwinds from Trump’s election are set to build.

It wasn’t supposed to be this way. Well positioned along one of the world’s busiest waterways for trade, Malaysia has capitalised on the global shift of supply chains away from China. The US$400 billion (RM1.7 trillion) economy has long welcomed technology companies including Intel Corp, but in recent years it’s seen an influx of investment for things like data centres and chip manufacturing that have helped make it a world leader.

Late last year, Anwar and Singapore Prime Minister Lawrence Wong presided over a ceremony cementing the establishment of a special economic zone linking their two nations’ border region that is meant to help accelerate investments. The momentum from all that good news helped the ringgit strengthen 2.7% against the dollar while nearly all other emerging market currencies declined.

Anwar has acknowledged the challenges ahead and argued that Malaysia can sustain its growth rate and keep inflation manageable even with the threat of a potential trade war. He vowed this month to aggressively explore trade opportunities with other countries, including in Africa and Latin America.

“Going forward, while the global environment could be challenging, growth of the Malaysian economy will be driven by robust expansion in investment activity, resilient household spending and expansion in exports supported by Malaysia’s strong economic fundamentals,” BNM governor Datuk Seri Abdul Rasheed Ghaffour said in a statement on Friday.

But for now, the country’s main manufacturing association is warning that tougher times lie ahead. On Thursday Trump ordered his administration to consider imposing reciprocal tariffs on numerous trading partners, with a global review due in April.

In Malaysia, the removal of fuel and energy subsidies, coupled with rising tariffs and supply chain disruptions could “raise operational costs and erode consumer purchasing power,” the Federation of Malaysian Manufacturers said in a statement to Bloomberg.

Anwar has long planned to cut fuel subsidies starting mid-year in an effort to save as much as RM8 billion, easing the fiscal deficit. His government removed blanket diesel subsidies last year. Electricity tariffs are also expected to be raised later this year.

Yet the gloomier global outlook — combined with a key state election in Malaysia — may pressure Anwar to delay full implementation of that proposal.

It’s not just the big manufacturers who are worried.

Smaller businesses also have a “very challenging” outlook, although they are more concerned with cost pressures at home rather than the impacts of Trump’s presidency, according to Chin See Seong, the president of SME Association of Malaysia — the body representing small and medium-sized enterprises.

If there is a bright spot, it’s that Trump has a slew of bigger targets on his list. Malaysia’s US$26 billion trade surplus with the US puts it at risk, but that’s far less than other Asian nations including Vietnam, South Korea and India. And Malaysia has the benefit of continuing to look like a relatively affordable alternative to China — whose nearly US$300 billion surplus with the US put it at the top of Trump’s list — as supply chains continue to shift.

“Companies trying to better manage the US tariff impacts on China and potentially on other Southeast Asian countries may invest in more value-added activities in Malaysia,” Adib said.Uploaded by Magessan Varatharaja

Source: Theedgemarkets